What is Vendor Managed Inventory (VMI) in Supply Chain?

Vendor managed inventory (VMI) is an arrangement where suppliers manage inventory levels that have been pre-determined. In short, the supplier takes decisions on behalf of the retailer wherein the supplier replenishes the inventory continuously. Also known as managed inventory, VMI is a data-driven with advanced procurement software, which can help vendors plan shipping and production dates in advance to minimize stock-out risks.

To achieve the above-mentioned goals, suppliers need high levels of visibility and control which can only come from an inventory management software that can centralize, collate, analyze and interpret data in real time. The software lets users set stock thresholds and notify vendors each time stocks fall below minimum inventory levels. Furthermore, the supplier simulation functionality helps vendors see what impact different stock levels will have, helping them plan more efficiently.